In brief
The Australian Government passed into law the Treasury Laws Amendment (Genetic Testing Protections in Life Insurance and Other Measures) Act 2026 (Cth) (“Amendment Act”) on 1 April 2026, and the Amendment Act received Royal Asset on 8 April 2026. Importantly, Schedule 2 to the Act provides for the long-awaited new exemptions from the requirement to hold an Australian financial services licence (AFSL) – being the comparable regulator exemption, professional investor exemption, and market maker exemption. Schedule 2 also provides a fast-track process for foreign financial service providers to apply for an AFSL by exempting them from the fit and proper person test if they are authorised to provide financial services in a comparable overseas regulatory regime.
Key takeaways
- Many foreign financial service providers (FFSPs) have been relying on the sufficient equivalence relief (i.e., passporting relief) and the limited connection relief, as well as the transitional provisions for each, since the early 2000s. The sufficient equivalence relief and limited connection relief are set to expire on 31 March 2027.
- FFSPs seeking to rely on the new comparable regulator exemption, professional investor exemption, or market maker exemption will be required to notify the Australian Securities and Investments Commission (ASIC). This notification also applies to persons who have previously (i.e., prior to the commencement of the Amendment Act) given ASIC notice of its use of an existing relief (e.g., the sufficient equivalence relief).
- The new FFSP exemptions under Schedule 2 come into effect on the day after the end of the period of 12 months beginning on the day Royal Assent is received. Therefore, the date of effect for the new FFSP exemptions is 9 April 2027. We expect that the transitional provisions will likely be extended to this date such that there is not a gap between the date the previous relief expires and the date the new FFSP exemptions begin.
- The limited connection relief will cease on 31 March 2027 – entities relying on this relief must carefully consider which exemption (if any) will apply to them going forward.
- FFSPs should examine whether they can rely on the new exemptions under the Amendment Act, and if not whether they need to apply for an AFSL or rely on a different exemption. FFSPs also need to consider the new conditions, requirements, and notification obligations associated with reliance on these exemptions. Should you have any questions on how these changes will impact your business or how you should prepare, please do not hesitate to contact us.
In more detail
A person who carries on a financial services business in Australia is required to hold an AFSL covering the provision of the financial service. Schedule 2 of the Amendment Act amends the Corporations Act 2001 (Cth) (“Corporations Act”) to provide new licensing exemptions for FFSPs.
Comparable regulator exemption
The “comparable regulator exemption” replaces the sufficient equivalence relief and is available to foreign companies or partnerships formed outside Australia that provide financial services to “wholesale clients” only. The comparable regulator exemption is only available where the person is authorised, registered, or licensed (as necessary) by a “comparable regulator” to legally provide the same or substantially the same financial service in a place outside Australia. Entities seeking to rely on the comparable regulator exemption are required to notify ASIC of their intention to rely on the exemption.
The Minister is given the power to determine who are the “comparable regulators” by legislative instrument and must have regard to a number of matters under section 911W(2) in making this determination. However, pursuant to the transitional provisions of the Amendment Act, for administrative efficiency regulators that have already been assessed by ASIC as having comparable regulatory regimes by a similar process, prior to the commencement of Schedule 2 to the Amendment Act, will be taken to be comparable regulators for the purposes of the first legislative instrument made under subsection 911W(1) of the Corporations Act, if the Minister is satisfied that:
- The regulator can be identified from a legislative instrument made by ASIC and in force immediately before the commencement of this section;
- The regulator is responsible for regulating the provision of financial services by providers in a place outside Australia; and
- The legislative instrument exempted those providers from certain provisions of Part 7.6 in relation to the provision of financial services.
Entities relying on the comparable regulator exemption must comply with the following conditions including (but not limited to):
- Submitting to the non-exclusive jurisdiction of the Australian courts when proceedings are brought by ASIC or a Commonwealth authority;
- Consent to information sharing between ASIC and each comparable regulator;
- Notify ASIC of any significant enforcement action, disciplinary action, or investigation undertaken against the person by any regulator, government authority, or relevant financial market operator in any place outside Australia; and
- Have an agent in Australia.
Failure to comply with one or more of these conditions may result in ASIC applying to the court for a civil penalty and pecuniary penalty order, cancelling the person’s exemption, or imposing additional conditions on the person’s future use of the exemption.
Professional investor exemption
The “professional investor exemption” replaces the existing professional investor exemption located in subsection 911A(2E) of the Corporations Act (as inserted by regulation 7.6.02AG of the Corporations Regulations 2001 (Cth)).
The new professional investor exemption is available where:
- The financial service is provided only to professional investors;
- The person provides the financial service from a place outside Australia (except during limited marketing visits pursuant to the requirements in section 911E);
- The person’s head office and principal place of business are located at one or more places outside Australia;
- The person reasonably believes that providing the same or substantially the same financial service would not contravene any law applying in the person’s principal place of business, head office, or the place from where the financial services are provided; and
- The person notifies ASIC that it intends to rely on this exemption to provide the financial service.
Entities relying on the professional investor exemption must comply with certain conditions. These conditions include (but are not limited to):
- Doing all things necessary to ensure that financial services that are provided predominantly inside this jurisdiction are provided efficiently, honestly, and fairly;
- Notifying ASIC of the person’s intention to rely on the exemption; and
- Complying with reasonable requests for assistance from ASIC.
If a person fails to comply with a condition, ASIC may apply to the court for a civil penalty declaration and a pecuniary penalty order, or after taking reasonable steps to give the person notice of the proposed decision and a reasonable opportunity to appear (or be represented) at a private hearing and make submissions, either cancel a person’s exemption for the provision of some or all kind of financial services or impose additional conditions on the person’s future use of an exemption.
Market maker exemption
The “market maker exemption” is available where:
- The person provides the financial service from a place outside Australia;
- The person’s head office and principal place of business are located at one or more places outside Australia;
- The person reasonably believes that providing the same or substantially the same financial service would not contravene any law applying in any of the places referred to in the above dot points;
- The person is making a market in derivatives that are able to be traded on a prescribed licensed financial market; and
- The person notifies ASIC that it intends to rely on this exemption to provide the financial service.
Entities relying on the market maker exemption must comply with the following conditions:
- Submitting to the non-exclusive jurisdiction of the Australian courts when proceedings are brought by ASIC or a Commonwealth authority;
- Complying with reasonable requests for assistance from ASIC; and
- Doing all things necessary to ensure that financial services that are provided predominantly inside this jurisdiction are provided efficiently, honestly, and fairly.
A failure to comply with one or more of these conditions may result in ASIC applying to the court for a civil penalty and pecuniary penalty order, cancelling the person’s exemption, or imposing additional conditions on the person’s future use of the exemption.
Fit and proper test exemption
Under Schedule 2, foreign companies or partnerships formed outside Australia that are authorised, registered, or licensed (as necessary) to legally provide the same or substantially the same financial services by a comparable regulator and only provide financial services to wholesale clients are exempt from the requirement to satisfy the fit and proper test when applying for an AFSL under section 913A of the Corporations Act.
For further details on this development and to help your business navigate the changes, please contact us.